Tips to beat those late payment culprits

In the wake of a recent industry report, which accuses the UK’s largest companies of ‘strangling’ smaller enterprises and conducting business unfairly, Bibby Financial Services is urging owners and managers to stand firm over unfair treatment and late payment from their larger counterparts.

Accounting for over 95% of the UK's 3.7 million businesses and employing 12.6 million people, large corporates must wake up to the importance of small business contribution to the prosperity of the economy. David Robertson, chief executive of Bibby Financial Services, believes respecting their smaller counterparts and operating on fair contractual terms is fundamental for larger companies hoping to maintain a reputation for good business practice.

Robertson said: “Small business owners and managers rely on a healthy, steady cash flow, and timely payment of invoices is crucial to sustain and keep them moving forward. Unfortunately, many owners and managers feel bullied by their larger counterparts, fearing that chasing late payments could damage relationships and result in the loss of a major contract.”

However, small business owners and managers can reduce the risk of falling into the late payment trap by ensuring their financial procedures are in order. To help them Bibby Financial Services has devised the following top tips:

• Agree payment terms and conditions – set out from the start of the relationship, ensure the terms and conditions are clearly stated on all relevant documentation. This will help limit liability and provide security
• Timing of invoices – send invoices immediately and always follow up with a telephone call to check receipt of invoice and when payment will be received
• Communication – forge good working relationships with customers and suppliers to make it easier to resolve payment problems. Establishing a good rapport with your customer makes the process of collection easier and less awkward
• Clarity of documentation – document and log all conversations/emails and keep a clear record of payments made, so you are able to monitor invoice status quickly and efficiently
• Understand you legal rights – understand your rights as a small business, establishing if the client can be charged interest on any late payments you are owed
• Offer incentives – try to reward customers who pay in good time, and perhaps offer discounts to those who pay early or who are consistently meeting your payment terms
• Weigh up the finance options – there are financiers who can help with funding and invoice collection. For example, invoice financiers can help improve cash flow by releasing cash tied up in unpaid invoices – up to 85% of those invoices as they are raised. Outstanding payments can also be chased by the invoice financer freeing up your valuable time management

David Robertson concludes: “It is both good practice, and a legal requirement, for large companies to offer and meet payment terms in an agreed period when dealing with a smaller business. Research shows corporates typically take 64 days to pay invoices, and while bigger businesses are able to work under these terms, smaller companies need to balance their books to carry on functioning.”

“However, it is not all bad news, larger companies can provide an excellent source of revenue for smaller businesses, providing the relationship starts on the right footing with fair financial practices agreed and adhered to from the outset.”